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Michigan's ranks of entrepreneurs have flourished in recent years, according to two reports issued Monday: a yearly report by the Ann Arbor-based Michigan Venture Capital Association and the 10th annual Michigan entrepreneurial scorecard compiled by MiQuest, a Lansing-based nonprofit affiliated with the Small Business Association of Michigan.

Both reports point to building momentum in Michigan's ability to attract and fund fledgling entrepreneurs.

According to MiQuest, which used 137 metrics to analyze data from 2012, Michigan ranks sixth nationally in entrepreneurial climate and first in the Midwest — a sharp turnaround from its ranking of 41st in 2007 and 2008.

'It's an exciting time'

MiQuest was formed in January after a merger between Ann Arbor-based Great Lakes Entrepreneur's Quest, a nonprofit that mentors would-be entrepreneurs and holds awards programs for startup and emerging companies, and the Lansing-based Small Business Foundation of Michigan. It has 13,000 members, including more than 5,000 second-stage businesses.

"I have been feeling in the last few years that the entrepreneurial ecosystem is growing and is more active. This scorecard really substantiates that," said MiQuest President Diane Durance.

"What's really notable to me is we moved up so far in the last five years while everyone else was also focused on entrepreneurship. It's not like we were the only one on the ball. Everyone else was trying to improve their programs, too. It's an exciting time."

Highlights of the MiQuest report:

In 2012, Michigan improved its 2011 rankings in every major metric, including the number of new businesses, the five-year survival rate of new businesses, the number of business incubators, funding from U.S. Small Business Innovative Research grants, gross domestic product, building permits and the state's business tax structure.

Credited for gains in those areas were the state's research and technology base, abundant and relatively low-cost energy, aggressive debt deleveraging, positive migration into the state after years of population outflow, natural resources and extensive growth in global trade.

After years of decline, Michigan began experiencing economic growth in 2010, with private employment growth exceeding national and Midwest averages in 2011 and 2012. In addition, gross domestic product per capita exceeded national and Midwest averages in 2011 and 2012.

After years of being in the bottom 10 states in three categories — the growth in one-year survival rate for new businesses, the growth of businesses adding jobs and in expanding exports — Michigan is now in the top 10 in all three.

Michigan is third in employment in high-tech manufacturing and fourth in employment in physical sciences and engineering.

The report wasn't all sunshine and roses. The state was ranked 36th in 2012 in the growth of the number of small businesses and 37th in the availability of commercial and industrial lending.

Funding growth

Venture capital entrepreneurship is certainly up in Michigan. More than $120 million was invested in 40 companies in the state last year, the highest number of deals in a single year since the MVCA was created in 2002.

There are 103 VC-backed companies in Michigan, an increase of 66 percent in the past five years. And there are 116 companies that have received funding from angel investors, an increase of 137 percent over five years.

Another record was set by the number of venture capital firms either headquartered here or with an office in Michigan: 33. This marks an increase of 50 percent during the last five years.

One of them is Pittsburgh-based Draper Triangle Ventures, which moved into an office in the Kerrytown district in downtown Ann Arbor last Thursday and also shares space in the Madison Building in downtown Detroit, courtesy of Detroit Venture Partners.

The move into Ann Arbor office space follows the firm's participation in an investment round in March of $2.7 million in Ann Arbor-based Amplifinity Inc., a customer loyalty and marketing firm.

"Michigan has made a concerted effort to nurture both early-stage local VC funds and out-of-state funds that have a presence or visit frequently," said Jonathan Murray, who will manage the Ann Arbor office.

"Both are important, because in-state funds are necessary to lead early investment rounds and provide nearby support, and out-of-state funds are needed to provide growth capital and larger networks of customers, talent, strategic partners and advice," he said.

Carrie Jones, the Michigan Venture Capital Association's executive director, said that group's report shows the sharp progress made in five years.

"The growth is really incredible," she said. "Last year was a year of biggest 'evers': The most number of deals, the most angel investing, the highest number of tech companies started in the state. All of these speak to our progress."

An investment last month sets up the state for another strong year this year. Plymouth Township-based ProNAi Therapeutics Inc. announced an investment round of $59.5 million, which is believed by the MVCA to be the largest single VC investment in state history.

Highlights of the association's annual report:

Michigan-based VC firms have $1.6 billion under management, the highest ever and an increase of 45 percent in the last five years.

Investments in life sciences companies accounted for more deals than any others in Michigan; of all investments, 45 percent were in life science companies. Forty percent of the companies that received investment in 2013 were in IT.

In the last five years, the number of venture capital investment professionals increased by 84 percent in Michigan to 81, compared to a 13 percent decrease in investment professionals nationally to 5,891. And while the number of VC firms nationally declined from 883 to 874 last year, the number headquartered in Michigan increased from 20 to 23.

There are more angel funders, who tend to invest smaller amounts at an earlier stage in a company's life cycle, than venture capitalists. In 2013, 36 Michigan companies received nearly $9.9 million in angel and pre-seed funding, and raised more than five times this amount in additional funding from other sources.